Grupo Mexico SAB de CV

BMV:GMEXICOB

Earnings Call Transcript 2022-Q4

[Operator]

Good afternoon. Thank you for holding, and welcome to Grupo Mexico's Fourth Quarter Earnings Conference Call. With us this afternoon are all of Grupo Mexico's top executives, who will discuss the fourth quarter and 2022 annual results, financial performance of the company, giving you a summary of the latest news and address any questions you might have at the end of the call.

Before we begin, I would like to remind you that information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements. Grupo Mexico undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All results are expressed in full U.S. GAAP.

The presentation may be followed through our webcast. [Operator Instructions] A copy of the slides that the company will be reviewing today is available on the website at grupomexico.com. [Operator Instructions] Now we will begin with Ms. Marlene Finny.

[Natalia Pariente, executive]

Hi, everyone. Good morning. This is Natalia Ortega. And thank you for joining us today for Grupo Mexico's Fourth Quarter Earnings Conference Call. Sitting with me here today are the top executives from our 3 divisions. During our call, we will be following the presentation that usually can be downloaded from the website or followed by accessing the webcast. Today's detailed program can be found on Slide #3.

I will kick off with Grupo Mexico's ESG highlights followed by the quarter's scorecard and financial highlights. Then Mr. Xavier Garcia de Quevedo will provide detailed information regarding our Mining Division's main highlights, projects update and commenting on the industry's economic environment. He will then be followed by Mr. Isaac Franklin, who will go through the financial results and main events of our Transportation Division. Lastly, Mr. Francisco Zinser will comment on our Infrastructure Division's relevant events, which occurred during the quarter. As it is customary, at the end, the line will be open for Q&A.

Before going on to our results, I want to highlight that our long-term growth and investment plans, along with diversification, have proved to be a competitive advantage as although we encountered a challenging environment and some atypical events such as our illegal blockade in Cuajone. Most of our business units showed a steady recovery during the fourth quarter of the year, reinforcing Grupo Mexico's resilience through troubled time.

With that being said, let's move on to our ESG highlights on Slide #5. Reinforcing our ESG commitment, Grupo Mexico obtained the third highest score in the CDP assessment on climate change and water security, positioning the company above the industry. As a result of our ESG-related performance, Grupo Mexico improved 11% at S&P Corporate Sustainability Assessment rating during the year. By doing this, the company is positioned among the top 9% performers in the mining sector and 50% above the average rating.

Our rescue squads from Charcas and Santa Barbara were awarded by Camimex and CONOCER with the first place in Underground Mining Rescue and First Aid, respectively. Closing with our social impact, we began to operate Casa Grande Movil in the communities near Fenicias wind farm, where diverse courses and workshops on education helped environment, among others, were provided in 5 rural communities in the General Bravo municipality in Nuevo Leon, Mexico.

Let's continue with our scorecard on Slide #6. Our revenues for the year totaled $13.87 billion, representing a decrease of 6.1% when compared to 2021. That was mainly due to a low copper price and production offset by steady revenue increases in our excellent results by the Transportation and the Infrastructure Division. Also, inflationary pressures resulted in the margin [indiscernible] year. Along these lines, our cash costs, which ended the year at $1.02 per pound, suffered a 22% increase when compared to last year. Our operating income ended the year north of $5.6 billion, which means a 24.3% decrease versus the last year, while our EBITDA totaled just above $7.14 billion, representing a 51.5% EBITDA margin, a 20.1 and 11 basis points decrease, respectively. Our copper production totaled just north of 1 million tons, a 7.2% decrease when compared to last year, but we were able to pump up production during the fourth quarter of last year, producing over 269,000 tons during the quarter, which means a 5.1% increase quarter-over-quarter. Our Board approved an increase in our dividend, setting a MXN 1 per dividend share -- per share dividend, reaffirming our strong dividend trend, which translates into roughly a 5% implied dividend yield.

On Slide #7, you can find our usual summary of financial highlights in case you need it at any point during the presentation.

Moving forward on to Slide #8, we wanted to show the full quarterly picture so we can highlight the strong recovery trend shown during the fourth quarter as we were able to significantly improve our financials. As you can see, revenues increased 21.6% quarter-over-quarter driven by a favorable metal price environment, especially molybdenum and an increase in production. Our cost [ contention ] strategy proved to be satisfactory as we're able to strongly increase our operating income and EBITDA 51% and 46.8%, respectively, on a quarterly basis. Lastly, I want to highlight our net cash cost for the fourth quarter of 2022, which ended the period at $0.72 per pound, a 43.9% decrease versus the third quarter of last year.

Now let's continue on to Slide #9. As depicted here, Grupo Mexico maintained a solid balance sheet with low leverage and a net debt-to-EBITDA ratio of 0.4x. As you might already know, our debt is mainly issued in U.S. dollars, representing 80% of the total debt, while the rest is denominated in Mexican pesos, and 97% (sic) [ 96% ] of our total debt was issued with a fixed rate. On this slide, you can also see the dividends paid from 2020 to 2022 and the implied dividend yield, including the MXN 1 cash dividend for the quarter approved by our Board priorly mentioned. We continue to have a comfortable debt maturity profile as pictured in Slide 10 with no payments of over $1 billion until 2035. And our cash and equivalent position ended the year in $6 billion. Also, I want to highlight that this year, we reduced debt by materially $400 million.

Now I'll let Mr. Xavier Garcia de Quevedo comment on our Mining Division's performance.

[Xavier García de Quevedo Topete, executive]

Thank you, Natalia. Good morning, everyone, and thank you again for joining us today. Today, I will start with some remarks on the current copper market on Slide 12.

During the fourth quarter of 2022, the LME copper price decreased 18% year-over-year [indiscernible] $4.40 per ton in the fourth quarter of 2021 to $3.63, reflecting [indiscernible] possible recession in the Europe, partially offset by [indiscernible] possible Chinese recovery. COVID prices for copper are over $4 per ton as a more positive outlook is perceived by the market due to the following points. A reduction in global inflation, which [indiscernible] or even stopped the interest rate hikes [indiscernible]. The turnaround in China's policy regarding [indiscernible] after the government in [indiscernible] has been the [indiscernible] real estate margin. The [indiscernible] the copper market [indiscernible] market environment [indiscernible] for 2023. This assumes a growth in demand of about 53% this year. [indiscernible] regarding future production growth in Chile and Peru, which together represents about [ 12% ] of the global supply. Low copper inventories, which stood at [indiscernible] with low inventories of [indiscernible] of consumption, an extremely low level.

It is important to emphasize that copper [indiscernible] which correlates positively with our [ assumption ] that the underlying demand for copper will be strong in the month end. This scenario [indiscernible] the current cycle of low prices will be [indiscernible].

Now let's continue with the Mining Division financial highlights in Slide 13. First, I would like to highlight that during the quarter, we achieved the highest production level for the year, a strong 5% increase when compared to production in the [indiscernible] quarter of 2022. Despite the progress, as Natalia previously mentioned, we ended the year [indiscernible] the production in 2021. This is mainly due to the [indiscernible] lower grade valuations. Our production in 2023 totaled 1,006,000 tons of copper, out of which 270,000 tons were produced during the last quarter. The reduction in production [indiscernible] along with lower copper [indiscernible] prices related to a decrease in revenues of 9.3% of the year 2022. It is important to bear in mind that 2021 [indiscernible] comparison as the last year result [indiscernible] record price for the company.

Our sales [indiscernible] the year goes out of $11 billion, while our EBITDA stood at $5.6 billion, 52% EBITDA margin. This margin compression was due to a higher net cash cost [indiscernible] $1.02 per ton, 22% higher than 2021, impacted by higher [indiscernible] cost due to global inflationary pressures and an increase [indiscernible] units produced. Despite these events, we continue to be the cost leader in the industry worldwide. As per our CapEx, we invested $1,044 million year-over-year.

I would like to continue focusing on our projects [indiscernible]. Let's first talk about our [indiscernible]. Our Pilares project is currently operational and already sending [ rich minerals ] to the La Caridad SX/EW plant. We expected to produce copper ore at full capacity for La Caridad [ concentrator ] in the second quarter of 2023. Buenavista [indiscernible] located in Sonora. The [ construction ] has an 84% progress in respect to new operation by the second half of 2023. The $416 million [indiscernible] a production capacity with 100,000 tons of zinc [indiscernible] that will double our zinc capacity while generating over 2,000 operational jobs.

In El Pilar, we continue the development [indiscernible] infrastructure works in [indiscernible]. The SX/EW plant EPCM project has been awarded to an experienced contractor.

Let's continue with our long-term projects. The Los Chancas, our project in Apurimac, Peru continued to be partially occupied by illegal miners as of December 31. Some of these illegal miners have the irregularly registered their stakes in the Integral Registry of Mining Formalization. The company has filed criminal complaints and other legal remedies, annulled the claims of [indiscernible] cases still open. During the fourth quarter of 2022, the company reported to [indiscernible] mine in Peru the start of exploration activities and began the evaluation of existing mineral resources in [indiscernible]. As part of the support to the Michiquillay and La Encañada communities, the company began contracting labor as well as the payment for the use of surface land as per the social agreements. We expect to continue exploration work during this year along with the completion of payment for the use of surface land and social programs in both communities. Lastly, El Arco located in Baja California, Mexico, the company has completed the environmental impact assessment and is reviewing the basic engineering analysis to apply for the environmental impact permits.

On Slide 16, we can see our robust pipeline with all our upcoming projects and their impact on production as we continue our [indiscernible] tons of copper produced per year. We're happy to have a follow-up question with [indiscernible] during the Q&A session. Now please I'll let Isaac comment on our Transportation Division.

[Isaac Unkind, executive]

Thank you, Xavier, and good afternoon, everyone. Thanks again for joining us. Continuing with the Transportation Division in Slide 18, I would like to talk about our financial highlights for the third quarter of the -- for the fourth quarter of the year.

First, I'm glad to announce that during the fourth quarter of 2022, most segments showed positive variation in revenue, continuing the positive trends in last quarters, with almost all segments showing positive revenue variation for the full year as well. Although we saw lower transported volumes during 2022, a 9.3% decrease in net ton kilometers and a 0.9% decrease in carloads, our sales, which totaled $2.71 billion for the year, increased 7.5% versus 2021. The increase was mainly driven by the positive performance of virtually most of our segments, led by Industrials, Metals, Cements and Minerals that show considerable increases for the year.

I'd like to comment a little bit on the main reasons for volume loss during the quarter, including the decrease in the U.S. railroads generated by the lack of crews and maneuvers at destinations affected some of our segments. Likewise, the Agricultural segment was affected by excess demand of fleet of U.S. grain export routes. Also, the Automotive continued with lags generated by microchip scarcity and congestions of American railways since the pandemic. And the Intermodal segment was affected by the lack of availability of containers in cross-border traffic. This decrease was partially offset by growth in [ carloads moving ] in the Industrial and Energy segments.

I am happy to say that our EBITDA totaled $1.23 billion during 2022, a 9.9% increase when compared to the previous year and a 15.8% when compared on a quarterly basis year-over-year. This translates into a 45.5% EBITDA margin. I am particularly proud about the margins since we've been operating in a high cost inflation environment but have managed to deliver an adequate cost control. Also, our net income during 2022, which totaled $482 million saw an outstanding 30.4% increase when compared to last year.

As we move forward to Slide 19, you can see our main highlights for the quarter. In most of our business units, volumes have returned stronger than pre-COVID levels, leading the positive results for the quarter, and on a cumulative basis, showing a 5.1% increase in Mexican pesos on a quarterly basis year-over-year. Our EBITDA totaled MXN 6.2 billion, an increase of 10.4% when compared to the same quarter of last year. Finally, as you might already know, a [indiscernible] per share dividend was approved by our Board, and we continue our share repurchase strategy with 2.8 million shares repurchased at an average price of MXN 33.39 per share.

Continuing with the main variation of our revenue on Slide 20. As I just mentioned, almost all of our segments saw revenue grow during the quarter with Chemicals and Intermodals being the only [ levers ] due to the decrease in fertilizer imports [indiscernible] by the Ukraine-Russia conflict and a slow recovery of the U.S. retail market. In relative terms, this quarter's top performance were Metals segment, which saw an increase of 30% as we saw increased demand of finished products, driving additional production and inbound of raw materials. The other segment which saw double-digit revenue growth were Cement, where the construction demand is driving Mexican cement exports to the U.S. And the Industrial segment [ profiled ] by substantial growth of new railcar production, although it hasn't reached pre-COVID levels. With medium growth, we have an Automotive segment increasing 5% due to the release of inventory during the planned shutdown in December. Energy with a 5% increase due to the throughput increase of domestic refineries, which resulted in higher fuel oil exports. Minerals were an increased demand of finished metal products, driving consumption of iron ore, resulting in a 3% increase. And Agricultural with a 1% increase due to the strong imports of corn and soy.

Now let's take a look at our operating metrics depicted on Slide 21. In general, metric shows sustained performance, and we saw a good combination between a 3% increase in average train speed and a 3% reduction in dwell time. Car velocity also saw an improvement of 2% from 275 kilometers per day to 281. Our train length saw a slight reduction of 1%. Here, I'd like to reiterate that we are working on a new master plan for 2023, where we intend to improve this by almost 10% to 12% with a similar capacity.

Gross tons per train were down 2%. Additionally, we saw an improvement of 1% on crew starts.

On Slide 22, we can see our expected CapEx for 2023. GMXT's Board approved a plan to invest $448 million during the year for maintenance, growth and efficiency projects. This will allow GMXT to continue with the required level of investment for infrastructure and service improvements. Around 55% of yearly CapEx will be invested in maintenance, including new rail and ties, locomotive overhauls, bridges and surfacing through which we also gain efficiencies, speed and reliability of our service. I want to highlight our $133 million growth CapEx, which as mentioned in our previous earnings call, is probably one of the largest that we have had, where $100 million [indiscernible] for fleet acquisition, focusing on containers, grain hoppers, intermodal wells, auto racks and containers and to be able to deliver the expected growth. Additionally, we are very keen on intermodal terminals where we're expanding capacity in relevant markets. Among other important projects that will allow us to continue gaining market share, including the Monterrey Bypass, [ $18 ] million will be invested in our efficiency programs, including track equipment and enhancing our digital operating system, along with the construction and reconfiguration of yards.

This concludes a general overview of the Transportation Division. I will now let Francisco Zinser to comment on the Infrastructure Division.

[Francisco Gonzalez, executive]

Thank you very much, Isaac, and good morning, everyone. I'll start by going through the financial highlights of the Infrastructure Division depicted in Slide 24.

First of all, I am very proud to say that all of the division business units in Grupo Mexico Infrastructure showed significant growth during the year. 2022 was a year of solid performance for us, where strict cost controls, higher power generation, continuous operation and high efficiency in our oil rigs, higher production at our construction and engineering firms and the traffic increase in our toll roads resulted in an increase of our revenues of over 19% versus 2021, totaling $664 million for the year. Along with our revenue increase, our EBITDA, which ended the year at $269 million was 19% higher than the result of 2021 with a 40.5% margin over sales. Lastly, our net income totaled $39 million, of which $6 million were generated during the fourth quarter, representing an increase of close to 128% versus 2021.

To close the Infrastructure Division highlights, I would like to go through some of our most relevant events depicted on Slide #25. I am happy to announce that over the last 3 years, the accident rate in our division has been continuously reduced by 47%. This is a result of the efforts of our team that has turned out with great success, where all of our collaborators work to keep everybody safe. Our operational excellence allowed Perforadora Mexico, or PEMSA, uninterrupted operations in all of its oil rigs during the year with an outstanding 99.4% operational efficiency, an all-time high for the company and reached an EBITDA of $51 million, a 13% increase versus 2021 on the same tariff basis.

In our toll roads, favorable effects of increased tariffs due to inflation and daily traffic expansion of over 13% allowed the business unit to net $51 million in sales and an EBITDA of $34 million, a 21% and 34% increase, respectively.

Continuing with the [indiscernible], I'm pleased to announce that for the sixth consecutive year, our engineering services company has achieved historical results, increasing net sales by 2% due to an increase in production and higher revenue recognition in third-party projects.

Lastly, as we have informed before, the Infrastructure Division is in the process of acquiring PlaniGrupo, a company dedicated to the development, construction and operation of 28 Power Center Malls in Mexico. This transaction contemplates an estimated investment of MXN 4,700 million equivalent to $230 million or 100% of the shares and remains subject to approval from regulators, which is expected to happen in February. This strategic acquisition will allow us to create a new business unit in the real estate industry with strong growth potential.

Finally, I will let Natalia to give her closing remarks. Thank you.

[Natalia Pariente, executive]

Thank you, Francisco. Thank you, everyone, for your time, and thank you, Xavier, Isaac and Francisco, for your comments. With this, we will open the line for the Q&A session, please.

[Operator]

[Operator Instructions] Our first question comes from the line of Regina Carrillo from GBM.

[Regina Carrillo Villasana, analyst]

Congratulations on the results. I wanted to ask if you have any color or any comments [indiscernible] regarding the [ development assets ]. We have been gaining a lot of [indiscernible] completely talking about a potential base point from Grupo Mexico.

[Unknown Executive]

We cannot address market rumors. As you know, Grupo Mexico is constantly analyzing opportunities, and we cannot comment any further. That goes for the rest of the questions about this matter. Thank you.

[Operator]

[Operator Instructions] Our next question comes from the line of Gabriel Simoes from Goldman Sachs.

[Gabriel Simoes, analyst]

I know that you cannot comment on the [ Banamex potential ] acquisition. But given that there is a potential large acquisition ahead, it would be interesting to hear your views on dividend going forward as well the optimal leverage situation that you envision for the company. So that's one question.

And the other one regarding the mining operations. So we've already discussed some of this during several conference calls, but any additional details would be interesting. So the much higher molybdenum prices that we've seen, it would be interesting to hear your thoughts on the supply and demand drivers for the [ metal ] this year. So how long do you expect the current high prices to last? And if you think that they're sustainable for longer? And how have the negotiations been for these prices so far?

[Unknown Executive]

Gabriel, thank you for your question. First, I'll address the dividend question. As you know, we cannot comment any further on the [ Banamex ] matter. But regarding dividends, it's the same rationale as before. Usually what's received as excess cash will be paid out to shareholders via our subsidiaries and also at the Grupo Mexico level. Our ideal leverage ratio would be under 2x net debt-to-EBITDA. That is the usual threshold that we have for the company. We're well below that. So that mainly answers the question. Thank you.

[Unknown Executive]

Talking about the molybdenum [indiscernible] operations, really [indiscernible] association. This projected for reduction in production and an increase in the -- and an increase in the demand. On our mines, [indiscernible] La Caridad” mine. La Caridad” mine is a mine now that has great significant resources [indiscernible]. As a matter of fact, it's a copper-moly mine. Combining the moly with copper, the [indiscernible] copper grade is over [ 40% ]. So this year, because the high price of moly that today is about [ $27 ] per ton, we will have a flexible mine planning because this amount is very [indiscernible] to optimize our revenues in this year.

[Operator]

Our next question comes from the line of Alfonso Salazar.

[Alfonso Salazar, analyst]

I have 2 questions. One is regarding Asarco. I don't know if you can provide some comments on the strategy given the short -- the tight copper market that we anticipate here. What are the plans to expand this -- the capacity at Asarco? Is it something that you're considering? Any comments on that regard.

The second question I have is regarding the strategy and the outlook for the Infrastructure Division. Many times, we think of Grupo Mexico as a mining company with a railway operation and the Infrastructure is kind of lost in the portfolio. But for many years, this division was increasing with new assets, has been increasing, as we speak, in terms of capacity to produce energy. So just wondering what is the game here? What is the end game? What is the plan? How do you expect to unlock value because this is a division that should be trading at a higher valuation that mine, for example? So if you can comment on the strategy in Infrastructure as well.

[Leonardo Contreras Lerdo de Tejada, executive]

Alfonso, this is Leonardo Contreras. In regards to Asarco strategy, basically, what we see here, we're analyzing the expansions at -- of our mine at Ray, and we're also analyzing some [indiscernible] our mines at Silver Bell. So -- but now, we're [indiscernible] 1.5 years [ or 2 ] years, we will be able to announce -- communicate further. It's also worth mentioning that we have been ramping up our slight medium operation of our [ Ray ] facility, which is in line with ESG metrics and around the [ circular ] economies. We've been making progress in that front. We're expecting to produce 7,000 tons this year.

[Alfonso Salazar, analyst]

Just on Asarco follow up. Are these expansions -- are you considering a second concentrator at Ray? Is it increasing capacity at Mission or Silver Bell? So just any comments on what are the plans or what you can comment on that?

[Leonardo Contreras Lerdo de Tejada, executive]

Yes. I think we're analyzing the [indiscernible]. One is, we will expand our current capacity. And the other one is to [indiscernible] by our exploration department, which at the moment, we [indiscernible]. So we are analyzing [indiscernible]. As of now, we have no plan.

[Francisco Gonzalez, executive]

Alfonso, this is Francisco. Regarding your question about the strategy in the Infrastructure Division. Well, as you know, we are the smallest division of the group. But that doesn't mean we are very relevant in the different industries where we operate. We have almost 900 megawatts of power. We would like to increase in the future. As you know, there have been some changes in regulation that unfortunately make us to be very cautious about the investments that we make in the future. We know that's something that's needed in the country, and we are more than ready for when the circumstances are there to continue investing there. Same for our oil rigs. We are the largest supplier for oil rigs, for PEMEX, with the highest efficiency. So we are the most relevant player in that market as well. We have our engineering and construction company, which allow us to develop many of the businesses where we operate and where we would like to operate, such as the toll roads where, today, we are not that relevant, but we are looking into other opportunities to continue to grow on that regard. And as you know, we have also had some other business lines that we would like to grow. But again, unfortunately, changes in regulation make us to be very, very cautious. We had a $1 billion investment plan to build fuel storage terminals. That project is currently on hold, waiting to see if -- how the regulation plays out. But we are -- I mean everything is ready to develop and deploy that capital as soon as the circumstances are ready. And finally, regarding our -- the real estate business that we're entering. We believe it's an industry with a lot of potential. We believe also PlaniGrupo is our first step to enter into this market, and not only Commercial, we're also taking a look at Industrial, which as you know, is very much demanded because of the [ near showing ] in the north of Mexico. PlaniGrupo is not only the assets, they come with a very solid platform that can allow us to increase rapidly. And we believe this could be an important avenue of growth for Grupo Mexico Infrastructure in the near term. We -- as you know, our numbers this year were significantly better than 2021, and we're expecting 2023 to be an even better year, somewhere between 18% to 20% better. And hopefully, we can continue delivering those growth in the near future with the strategies that I have informed. I don't know if that answers your question.

[Alfonso Salazar, analyst]

Yes. That's good color. So the Real Estate segment will be part of Infrastructure? And you mentioned that you want to do also real estate -- industrial real estate as you're planning to do, sir?

[Francisco Gonzalez, executive]

The Real Estate Division, starting with PlaniGrupo, will be under the Infrastructure Division, Grupo Mexico Infrastructure. And as we always do, we are looking at opportunities in the market. We didn't -- this opportunity was not a one-off. That's what I wanted to mention. We would like to see how we can improve synergies and continue growing in this segment, both in Commercial and hopefully in Industrial as well.

[Operator]

[Operator Instructions] Our next question comes from the line of Isabella Vasconcelos from Bradesco BBI.

[Isabella Vasconcelos, analyst]

Can you hear me well?

[Unknown Executive]

Yes, yes, we can, Isabella. Go ahead.

[Isabella Vasconcelos, analyst]

Okay. Great. Great. Okay. So I have a couple of questions. The first one on Transportes. If you could -- kind of a guidance is possible in terms of the outlook that you're expecting for 2023 in terms of potential volumes and margin expansion, if possible. And on the Infrastructure side, if you have any potential expected time line for the final conclusion of the PlaniGrupo acquisition, that will be helpful as well.

[Natalia Pariente, executive]

It's for transportation. Isaac, did you get the question?

[Isaac Unkind, executive]

Yes, about the outlook, no? The outlook for the year.

[Natalia Pariente, executive]

Yes, the first one for -- yes.

[Isaac Unkind, executive]

Yes. Well, thanks for your question, Isabella. What we are expecting is for this year, our volume growth between 4% and 6% and our revenue growth between 9% and 12%, due mainly to the recoveries -- to the recoveries on the agricultural and now that the Class 1s are running in a better position.

[Francisco Gonzalez, executive]

And this is Francisco, regarding your second question, Isabella, about the time line. As you probably know, PlaniGrupo is a public company. We have submitted the applications to the CNBV (Comisión Nacional Bancaria y de Valores) and COFECE last year. We have been having different conversations with both regulatory agencies. We are expecting their approvals to happen in February, hopefully. And that being the case, then we have -- because it's a public company, we have 20 days to launch the offering. And hopefully, if everything goes according to plan, starting April, maybe May, depending on how the calendar happens, we would be taking over PlaniGrupo and consolidating it in Grupo Mexico Infrastructure.

[Operator]

[Operator Instructions] Our next question comes from the line of Jean Baptiste Bruny from BBVA.

[Jean Baptiste Bruny, analyst]

Just a couple left for me, basically. First one on mining. Could you maybe come back on what happened with molybdenum? You have sales in the fourth quarter growing 65% when production is basically down 16%, and prices are up 14%. So maybe if you can walk us through the details of what happened? And then can you provide as well an idea of what you expect in kind of production for copper in 2023 as well as in terms of cash cost...?

[Unknown Executive]

[indiscernible] 2023 copper production will be 1,048,000 tons [indiscernible] production will be [indiscernible] our projection of [indiscernible] tons. However, by analyzing the possibility, as I mentioned with the La Caridad copper mine, we could easily increase this production [indiscernible] tons more without affecting the copper production.

[Jean Baptiste Bruny, analyst]

Okay. Very clear. And in terms of the cash cost?

[Unknown Executive]

The cash cost for 2023 is -- total cost is [ $2.20 ] and the [indiscernible] improved with cash cost [indiscernible] projection as of today is $1.27. But with these prices [indiscernible] will probably increase the copper price because this $1.27 is based on [indiscernible]. But we want to be conservative with this.

[Operator]

Your next question comes from the line of Areli Villeda from INVEX.

[Unknown Executive]

Areli, can you hear us well? I think we lost her, [ Gigi ].

[Areli Villeda Baranda, analyst]

Can you hear me?

[Unknown Executive]

Yes.

[Areli Villeda Baranda, analyst]

Regarding the [indiscernible] in Peru, I would like if you can give us some color of how it's going on the operations of your mines there? Or if there are some disruptions? I know that you are not one of the most affected, but I would like to know if there are some impacts to consider.

[Raul Jacob, executive]

If you don't mind, let me answer the question. This is Raul Jacob from Southern Copper. We are not having any -- we haven't experienced any -- well, difficulties in our operations in Peru. At certain point in time, the main road that brings in supplies has been blocked. But we had -- and we still have a good amount of inventories of supplies to weather this circumstance. We are analyzing other possibilities, if it is necessary to bring in materials, but so far, the Peruvian Army with the police has been unlocked the main roads. That is also applying to our -- to where our operations are. So right now, we have no inconvenience for our operations.

[Areli Villeda Baranda, analyst]

Okay. And regarding the production, I loved it. So can you repeat me what's the outlook for the production of copper for 2023, please?

[Raul Jacob, executive]

Yes, it's 925,000 tons.

[Unknown Executive]

This is in Southern [indiscernible].

[Raul Jacob, executive]

Yes, I'm talking -- yes, if the question was for -- I answer for Southern Copper. That's correct.

[Areli Villeda Baranda, analyst]

Yes, for Southern Copper and for Asarco, I think -- can you give me some color, too?

[Unknown Executive]

Yes. Areli, for Asarco's production, it will be 124,000 metric tons.

[Areli Villeda Baranda, analyst]

Okay. So I would like to understand that if there are some disruptions in the mines of Peru, [indiscernible] could we import or [indiscernible] some of that production just in...

[Unknown Executive]

No, no. [ Michiquillay ] as I mentioned is a copper-moly price group contains of course. The moly production in Peru [indiscernible].

[Operator]

Your next question comes from the line of John Tumazos from Very Independent Research.

[John Tumazos, analyst]

GMXT bought us back some shares in the fourth quarter. Could you just review what percent Grupo Mexico owns of Southern Copper and GMXT? And how many shares [indiscernible] of each?

[Unknown Executive]

John, yes, sure, I'll give you the percentages. Grupo Mexico owns about 88.9% of Southern Copper and around 70.7% of GMXT.

[John Tumazos, analyst]

It's 70.7% of GMXT?

[Unknown Executive]

Yes, correct. That is after the merger.

[Operator]

Your next question comes from the line of [ Guillermo Diego Delgadillo ] from Santander.

[Unknown Analyst]

[indiscernible], but if we consider [indiscernible] operations, tangible capital is like [ 4 billion ] and the earnings are like [ 1.1 billion ], how you provision that with marketing standards, it's like 900 million. Either way, it's like [indiscernible] basis operation of close to 10%. So versus your return on equity adjusted for book value operations, we would think that it would suggest a dilution of close to 20% acquiring those assets. The question is not commenting on the transaction, but on the project finance or treasury perspective, what are the guidance standards that you take into consideration when taking a look which transactions you're eager to analyze and which transactions you [indiscernible]?

[Unknown Executive]

Guillermo, thank you for your question. Regarding the [ Banamex ] matter, again, unfortunately, we cannot comment anything on this matter. Regarding projects based on what we've historically done, we continue to analyze M&A that makes sense through our other divisions to continue to grow within the company with organic growth and also in organic growth. That's how the company has managed the M&A matters for the past many, many years, and that's what we'll continue to do. Thank you.

[Operator]

Thank you. At this time, I would now like to turn the conference back over to Natalia Ortega for closing remarks.

[Natalia Pariente, executive]

Thank you, [ Gigi ]. I just want to thank everyone for your time. If you need any follow-up, please feel free to reach out. You know where to find us, and have a great day. Thank you.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.